If you consider opening a business, one thing you should think of first is the liquidity of your business. This same rule applies to a cryptocurrency exchange. You need to make sure that you incorporate high liquidity features into it to make your business endeavors pay off.
Before we see how this is applied in an exchange, let’s see what liquidity actually means.
If we look at the basic definition of liquidity, it is the ability to buy or sell assets without significant loss of the asset value. Liquidity is usually used in two contexts – market liquidity and asset liquidity.
Market liquidity refers to a market environment, in which there are always investors that are willing to trade.
Asset liquidity refers to an asset that can be easily sold to gain cash.
For cryptocurrency exchange, liquidity is an important and necessary aspect to ensure its long-term durability. A cryptocurrency trading liquidity provider ensures transaction stability for both buyers and sellers of the cryptocurrency. This explains why having a reliable cryptocurrency trading liquidity provider defines the success of your exchange platform.
The idea of the cryptocurrency market is about arranging and enhancing sales of virtual assets by keeping cryptocurrency within its accounts. Cryptocurrency exchange liquidity providers focus on proving this high liquidity to both buyers and sellers.
The cryptocurrency market is extremely volatile. Bitcoin as the king of all cryptocurrencies has undergone a number of ups and downs in value. Nevertheless, it remains the most traded virtual asset with high liquidity.
You should note, that building liquidity takes a lot of time and effort. If you focus on building liquidity using your own resources, you are very likely to miss on developing the exchange and its services. Regardless of whether you decide to do it yourself or engage a service provider, you need to prioritize liquidity before anything else, as this is the key factor to attract investors.
To create liquidity you can either make your own exchange platform or contract a service provider that will be able to offer particular software solutions for you.
What Should You Pay Attention to When Choosing a Liquidity Provider for Your Exchange?
Choosing the right liquidity partner is a complex task but vitally important. Do your research and evaluate providers thoroughly before making this crucial decision for your exchange.
Fintech is a highly time-sensitive industry, therefore it is crucial that your liquidity provider is highly responsive and available to step in and provide updates at your earliest request. In fact, make sure you outline this request in the service agreement and make it as specific as possible.
Your clients want to see your exchange platform as a reliable source to trade, and so do you by having a trustworthy liquidity provider. Any risks arising from the poor performance of a liquidity provider will become your risks. Therefore, do a thorough research and make sure you choose a company with good reputation.
Efficiency in performing daily tasks is very important. The nature of cryptocurrency exchange implies deviations, you should be ready to monitor and address issues as, and when they arise. Therefore, your liquidity provider should make an automated trading server available to all parties that work along, so that they are able to check the transaction flow.
The market may offer quite a few liquidity providers as the interest in the crypto industry grows. In addition to the three important factors that we listed earlier, you need to check if the potential liquidity providers have an operations history and if the technology they use is relevant and up-to-date.
Here at Fintatech, we meet all the criteria above and will be delighted to become your reliable long-term liquidity provider. We use a variety of approaches and always do our best to offer the best solutions that match our clients’ particular purposes.
If you do not yet have an exchange platform, you came to the right place. We have over 10 years of experience in creating unique platforms for exchanging digital assets. Using modern technologies, we make our digital asset exchange platforms stay relevant and updated and provide full support even after the platform has been launched.
Get in touch with us to find out more about the opportunities we can create for your crypto exchange platform.